The US government's handling of state secrets is out of date, over-cautious and incapable of keeping up with the vast quantities of electronic data produced in the digital age, a federal committee says in a report to President Barack Obama that is published on Thursday.

The report from the Public Interest Declassification Board, an advisory committee set up by Congress, paints a devastating picture of a secrecy system that is "outmoded and unsustainable". The credibility of the system is under threat, it says, from widespread over-classification that in turn is fostering the growth of leaking of government information.

"The current classification system is fraught with problems. It keeps too many secrets, and keeps them too long; it is overly complex... and a culture persists that defaults to the avoidance of risk rather than its proper management," the report says.

At worst, the report warns, the expansion of secrecy in the modern world of digital communications could undermine democratic accountability: "At its most benign, secrecy impedes informed government decisions and an informed public; at worst, it enables corruption and malfeasance."

The board's conclusions point to a mounting crisis that faces the US government over secrecy. On the one hand, it is producing petabytes – that is, quadrillions of bytes – of classified information every year.

On the other hand, the increasing number of leaks of classified information, which the board suggests is directly linked to the mushrooming of secrecy, is being stamped on more ruthlessly by the Obama administration than ever before. The 1917 Espionage Act has been wielded six times since Obama entered the White House, twice the number of prosecutions started by all previous administrations combined.

One of the six individuals to have fallen foul of the Espionage Act is Bradley Manning, who faces possible life in military custody for having supplied hundreds of thousands of state documents to the whistleblower website WikiLeaks. Manning downloaded classified material for which 4.2 million Americans have security clearance – almost as many people as the population of metropolitan Washington.

Experts say that with such a huge number of individuals able to access gigantic quantities of secret documents, many of which should not have been classified in the first place, it is no wonder that leaking is becoming a growing problem. "The system is losing integrity, and that in turn makes people more likely to leak," said Amy Bennett, assistant director of openthegovernment.org .

Bennett pointed out that the WikiLeaks trove of US diplomatic cables leaked by Manning included such portentous confidential documents as a description of a lavish wedding in Dagestan, in the North Caucusus. "That was just funny, it didn't deserve the level of security the government had given it," she said.

The board's report is being seen by campaigners for freedom of information as an important first step in fixing a broken classification system that was set up on paper 70 years ago. In its set of recommendations, the board suggests that the three current levels of classification – top secret, secret and confidential – should be simplified into two, that official documents relating to time-specific events should be released to the public as soon as the event is over, and that the system should be modernised to exploit new digital technologies.

Crucially, it says that the White House has to take the lead in forcing the changes through. "There is little recognition among Government practitioners that there is a fundamental problem," the report says. "Clearly, it will require a Presidential mandate to energise and direct agencies to work together to reform the classification system."